[Investment points]

On August 29, 2023, the company released its 2023 annual report. 23H1 achieved operating income of 705 million yuan, a year-on-year increase of 7.01%, and realized net profit not attributable to parents of 58 million yuan, a year-on-year change of -22.85%. 23Q2 achieved operating income of 409 million yuan, an increase of 11.62% year on year, net profit not attributable to parents of 225 million yuan, a year-on-year change of -27.19%, and short-term profit pressure. In terms of cost rate, the company's 23H1 sales expense rate/management expense rate/R&D expense rate/financial expense ratio were 2.12%/14.92%/4.26%/2.31%, respectively. The year-on-year change was +0.25 pcts/+3.08 pcts/+1.48 pcts/+1.41 pcts. The main reason was the expansion of the scope of the company's merger and increased investment in R&D projects.

The battery case business has increased sharply, and profitability has improved. By industry, 23H1's special equipment manufacturing/battery case business/photovoltaic power generation and other businesses achieved revenue of 399/285/210 million yuan respectively, a year-on-year change of -27.61%/+415.07%/-60.24%, achieving a gross profit margin of 46.55% /5.

02%/39.38%, year-on-year change +11.03pcts/+3.21pcts/+16.32pcts, gross margin improved significantly.

DWI's new production line is progressing smoothly and is about to be put into production. Based on existing canning technology, the company entered the lithium battery case race track. 1) Square battery case: In order to further expand the square battery case business, the company acquired Changzhou Hesheng and modified its original equipment. Currently, the modified equipment is being installed and tested. Furthermore, the company has successfully developed a square battery case production line with DWI technology. It is expected that the production line connection work will be completed soon and put into operation in 23Q4. 2) Cylindrical battery cases: At present, the company's small cylindrical steel cases and cylindrical aluminum cases have been supplied to customers in batches. The 46 series large cylindrical steel shell production line has completed the combination of equipment manufacturing and automated high-speed production lines. Currently, it is in the small-batch production stage, and the production speed can reach 100 units/min. In the future, large-scale mass production will be carried out in response to customer needs. In addition, the company is actively developing battery case business in the US through its subsidiary US Precision Equipment, and is currently actively promoting related matters such as site selection and customer contacts.

Continuously increase production capacity to empower the battery case business. On February 21, 23, the company announced that it intends to sign an investment agreement with the Fenyi County Industrial Park Management Committee to invest 350 million yuan to build a production line for products such as battery cases and sheet metal structural parts. It is expected to be put into operation in June '23. On July 31, 23, the company deliberated and passed the bill. It plans to sign an investment agreement with the Dongqiao Management Committee and Ningde Juneng to invest 200 million yuan to build a power battery structural component project. With the gradual release of the company's production capacity, the battery case business is expected to experience a high increase.

[Investment advice]

The company is expected to benefit from the volume of the new energy battery case business. We predict that the company's revenue for 2023/2024/2025 will be 27.00/46.01/5921 billion yuan respectively, with a year-on-year growth rate of 55.92%, 70.45%, and 28.68%, and net profit of 212/337/401 million yuan, a year-on-year change of -6.00%, +58.77%, +19.04%. The PE corresponding to the current price is 32, 20, 17 times, giving it a “increase in holdings” rating for the first time.